3D Printing Financials: Unpacking Stratasys’ 2023 Earnings

Following the release of its fourth quarter and full-year 2023 earnings report, ​​Stratasys (Nasdaq: SSYS) saw a rise in stock value despite a year of financial ups and downs. Although the company celebrated its tenth consecutive quarter of adjusted profitability, it faced a 3.7% decline in annual revenue from the previous year, totaling $627.6 million. It reported a net loss of $123.1 million, or $1.79 per share. With annual figures reflecting a tough year, Stratasys now sets its sights on recovery and growth in 2024, projecting a revenue range and earnings uplift.

A Mixed Bag

In the fourth quarter of 2023, Stratasys’s revenue was $156.3 million. This is a slight increase of 1.3% from the year before, without counting the divestiture of Stratasys Direct—which was sold to Cumberland Additive in November 2023. However, with everything included, revenue fell by 1.9% from the same time last year. Breaking it down further, product sales slightly dropped by 0.7% to $110.4 million, and system revenue was down by 13.7% to 47.4 million compared to the same period last year, mainly due to constraints in capital budgets, which continue to impact customer buying behavior for new systems. However, there was an increase in consumables revenue by 11.9%, totaling $63 million. Additionally, service revenue went up by 3.6% when the company excluded the effects of the Stratasys Direct divestiture, but overall, it was 4.6% lower than last year’s quarter.

The company also posted a net loss of $15 million, or 22 cents per share, in the last quarter of the year. However, adjusted financial results tell a slightly brighter story, with a net income of $1.6 million, or 2 cents per share, marking what Stratasys CEO Yoav Zeif described as the company’s “tenth consecutive quarter of adjusted profitability.”

“As the macro business environment continues to improve and capital spending patterns return to normal, we expect the pent-up demand to reaccelerate growth, particularly in our system sales,” Zeif told investors during an earnings call. “We are confident that as our new technologies ramp and our operational efficiencies continue, gross margins and profitability will strengthen in 2024 and beyond.”

Stratasys CEO Yoav Zeif giving the AMS 2024 Keynote Speech. Image courtesy of Sarah Saunders/3DPrint.com.

Revenue Realities

Zooming out to look at the full-year performance, Stratasys reported annual revenue of $627.6 million, a 1.3% increase from 2022 after excluding the MakerBot divestiture and the two businesses that were divested from the brand’s Stratasys Direct service bureau. However, the unadjusted figure suggests a decline of 3.7%. The company posted an unadjusted net loss of $123.1 million, or $1.79 per share, a notable decrease from the previous year’s unadjusted net loss of $28.9 million, or 44 cents per share. However, despite these challenges, it achieved an adjusted net income for the year of $7.7 million, or 11 cents per share.

Amid a CapEx-constrained environment for customers, Zeif said Stratasys managed to improve gross margin for the year despite the modest change in revenues and reflecting a focus on cost controls and operating efficiencies.

“We continue to maintain a healthy balance sheet that provides stability through challenging times and optionality to support our growth through organic investments and accretive acquisition opportunities. As we shared each year, in 2023, we generated 34% of our revenues from manufacturing, up from 32.5% in 2022. We expect to see this metric grow stronger as global business conditions improve, and the majority of our business will come from end-part manufacturing at scale,” remarked Zeif.

According to the executive, Stratasys’ rich history of innovation in 3D printing traces back to the invention of Fused Deposition Modeling (FDM) by the company’s founder, Scott Crump, 35 years ago. He explains that this technology remains the most popular in the industry to date. Continuing this FDM tradition, Stratasys introduced the F3300 printer in the fourth quarter of 2023. Doubling the speed of existing technology, the new printerStratasys CBO Weighs in on Navigating the Future with F3300 in 3D Printing Landscape is specifically designed for manufacturing at higher volumes and has already gathered interest from various industries, notably in the automotive sector. Toyota became the first customer to adopt this technology, and Stratasys is already collaborating with Daimler Truck North America to enhance its prototyping and manufacturing capabilities.

Furthermore, Zeif noted that the company’s new line of stereolithography printers has also been a success, with orders from Whirlpool, F1 McLaren, and service bureaus in the U.S. and Europe. Looking ahead, Stratasys aims to expand its automotive offerings further, leveraging its PolyJet technology through partnerships with leading automotive manufacturers like Mercedes-Benz, Maserati, Volkswagen, and Stellantis.

Stratasys brings 3D printing to McLaren. Image courtesy of Stratasys.

Strategic Snapshots

Perhaps one of the most exciting revelations by the CEO during the earnings call was the significant progress made in dental applications and key milestones achieved by Stratasys. Zeif highlighted the dental sector as a major growth area for the 3D printing industry, highlighting the company’s continued expansion in this field. In 2023, Stratasys saw growth in dental applications when it introduced the TrueDent solution, launched in the first quarter of 2023 and expanded its customer base. By pairing TrueDent resins with the J5 DentaJet printer, Stratasys allowed the creation of full, permanent monolithic dentures at scale, significantly reducing production costs and labor for labs while improving patient outcomes. Leading lab networks and dental support organizations in the U.S. and Europe have begun deploying this offering.

“A real-life example of how disruptive and impactful TrueDent happened last month when we announced our partnership with Express Dental of Oklahoma at a two-day event where dental services were being provided for free to those in need. Over 55 people had their mouths scanned on the first day and, the very next day, went home with a brand new set of dentures courtesy of TrueDent. This level of speed, accuracy, and low cost has never been possible at scale until today,” pointed out Zeif. “We plan to roll out new business models and partnerships to help accelerate the adoption of additive manufacturing in dentistry and expect this business to meaningfully accelerate in the years to come as we continue to win business from conventional manufacturing.”

CEO Panel at AMS 2024. Image courtesy of Sarah Saunders/3DPrint.com.

Growth Glimpses

Looking ahead, the company projects a full-year revenue for 2024 from $630 million to $645 million, with an anticipated improvement in gross margins and operational efficiencies. This forecast could be cautiously optimistic, depending on the drop in macroeconomic pressures and a rebound in capital spending.

According to CFO Eitan Zamir, Stratasys expects to see improvements in the back half of the year but assumes that “the softness in global capital purchasing conditions continues to be challenging.” In 2024, management expects the unadjusted gross margin to improve from 49% to 49.5%, with the second half stronger than the first half based primarily on the anticipated revenue increase throughout the year. Continued improvement in profitability is an important objective, said Zamir, and for 2024, he anticipates seeing a return to growth across the profit metrics. Meanwhile, the adjusted net loss for 2024 is predicted to be between $88 million to $72 million, or $1.24 to $1.01 per share, and unadjusted net income in the $9 million to $14 million range, or $0.12 to $0.19 per share.

When analyzing Stratasys’s performance, Trey Jensen from Cantor Fitzgerald noted that although the fourth quarter earnings report faced challenges due to macroeconomic and geopolitical headwinds, the results were largely in line with expectations, with management indicating signs of a potential recovery, especially anticipating an improved pipeline in the latter half of 2024. After the earnings release, Jensen revealed that Cantor Fitzgerald made slight downward adjustments to their revenue estimates for 2024 and 2025, leading to a lower earnings per share (EPS) forecast for both years. Nevertheless, despite these revisions, they maintain an overweight rating on Stratasys stock but with a lowered price target of $23. Jensen highlights the anticipation of pent-up demand and a favorable product cycle as significant factors driving expected revenue growth in 2024.

With all of this, Stratasys stock moved closer to the $12.5 mark after the release of its earnings report, having exceeded consensus estimates, in general, for the last quarter of 2023. Last year, Stratasys’ stock experienced fluctuations and challenges alongside broader market conditions and company-specific factors; however, the stock did not experience significant price volatility in the past three months. As Zeif said, although customers are currently challenged by macro conditions constraining their spending and slowing their purchasing of Stratasys’ products, these challenges are “only a delay in the inevitable widespread and faster adoption of additive manufacturing.”